Signal & Brus

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I am sceptical about buying shares in the big banks. They are established, profitable and often generous with dividends. But after the sharp share-price gains, I think there is reason to consider how sustainable their profits are as competition changes.

A stable company is not automatically a good investment at any price. And a high dividend counts for less if future margins are lower.

The share-price rise has already happened

SEB illustrates why I hesitate. According to its 2025 annual report, the Class A share rose from SEK 151.45 to SEK 195.10 during the year—almost 29 per cent, excluding dividends. At the same time, earnings per share fell from SEK 17.51 to SEK 15.60. That does not mean every bank is overvalued, but it shows that the share price can race ahead while earnings move in the opposite direction.

Competitors do not need to replace the entire bank

Specialist banks do not need to take over the entire customer relationship to become a problem for the big banks. It is enough to win the savings account, the mortgage or another profitable part. The Swedish Financial Supervisory Authority’s Bank Barometer shows that the big banks continued to lose market share in the Swedish lending market during the second half of 2025, while banking-sector profitability declined.

Then there are international players such as Revolut. The company already offers SEK savings accounts to Swedish customers. My point is not that Revolut always has the best terms, but that customers have more alternatives and competition increasingly need not stop at national borders.

AI may make customer inertia less profitable

In today’s market briefing, 11 October, I discussed how AI assistants could change the competition for savings. The background is a Reuters Breakingviews analysis of how automated interest-rate comparisons could put pressure on bank profits.

A great deal of money remains in low-interest accounts because comparing terms and moving the funds is inconvenient. Imagine an AI assistant monitoring the alternatives for you, weighing fees, fixed terms and deposit guarantees, and helping you switch when it pays. Fully automated switching is still a future scenario, but the direction is interesting.

For customers, that could mean better interest rates. For banks, it could mean more expensive deposits. If competition simultaneously squeezes lending rates and fees, margins could be compressed from several directions. AI combined with more international alternatives could make it much harder to profit from customers not having the energy to compare.

Payments are also moving into the mobile phone

The same change is visible in payments. Mobile apps and digital wallets allow us to pay and send money without using the traditional big bank’s own services. Other players can take over the customer relationship and part of the revenue.

Paying by mobile does not, of course, mean that every bank disappears from the chain. Apple Pay, for example, normally uses an underlying card, and Swish is the banks’ own solution. But the bank may become more distant from the customer when someone else owns the interface. The ECB describes precisely the risk that digital wallets take both revenue and customer relationships from European payment service providers.

More direct account-to-account payments are also being developed and may reduce the need for certain intermediaries. The Riksbank is calling for more such instant-payment services. To me, this reinforces the picture: the big banks risk facing tougher competition for savings and loans as well as for the payments themselves.

The big banks also have advantages

On the other hand, banks could become some of the biggest winners from AI-driven efficiency gains. I see great potential in automating parts of customer service, administration and document handling, thereby reducing staff costs. The scale of the big banks may also make it easier to spread investments across many customers. But the calculation must add up: the savings need to exceed the costs of AI services, integration with existing systems, security and human oversight. If technology suppliers capture a large share of the benefit through high fees, the improvement will be smaller than it first appears. The banks also have large customer bases, trust and extensive funding. Regulation and practical obstacles mean banking services will not become borderless overnight.

But as a shareholder, I want to know how much of that efficiency gain the bank gets to keep when customers also become better at choosing. I do not want to pay for today’s profitability to continue as if competition were standing still.

My scepticism is therefore about the price and future earning power. After the share-price gains, I want a clear margin of safety before buying. The bank may remain solid while the shareholder’s return becomes far less impressive.

This translation was prepared with AI. The original featured illustration was generated with AI.